A stop order is used to trigger a market sell when the market drops to your trigger price, or used to trigger a market buy if the market rises to your trigger price. This is often used as a stop loss order if the market is moving against your trade. Stop orders will fully execute as a market order once the trigger price is reached.


Example: If the current market price is 1950, the trader in a long position might want to sell if the price reaches 1945. A stop sell at 1945 will be used in this example. If your are shorting, a trader would place a stop buy above the current price. This would mean that if the market goes against their short (up) they can cut their losses by buying to close or reduce their short position.